Posted Dec 21, 2012 05:10 pm CST
Imposing a sentence that had been agreed to months earlier, at a Thursday hearing that gave victims a chance to make their feelings known, a federal judge in Manhattan gave Peter Madoff a 10-year prison term for his role in his brother Bernard Madoff’s infamous Ponzi scheme.
An attorney by training, Peter Madoff, now 67, served as chief compliance officer for a swindle that reportedly cost investors nearly $20 billion in principal and previously earned mastermind Bernard Madoff, now 74, a 150-year term. The younger brother admittedly falsified books and records for the purported hedge fund that served as a front for the Ponzi scheme operated by Bernard Madoff’s investment firm, but said he had no idea that a wholesale fraud was ongoing on his watch, according to Bloomberg, the DealBook page of the New York Times and Reuters.
As investigators found after the fraud came to light, the hedge fund, despite purportedly purchasing large amounts of stock, had made no trades whatsoever for years. Thus, any effort, either by Peter Madoff or the U.S. Securities and Exchange Commission, which several times looked into the Madoff firm’s operations, to spot-check claimed stock purchases should have revealed the swindle some time before Bernard Madoff confessed it to his sons in late 2008. By that time, the scheme’s assets had dwindled to $300 million and Peter Madoff reportedly participated in a plan to pay out those funds to employees, family members and friends. However, Bernard Madoff’s sons alerted authorities and the firm collapsed before the payouts were executed.
U.S. District Court Judge Laura Taylor Swain also ordered Madoff to pay $143 billion in restitution, which will strip him of assets and, the judge said, assure his “financial ruination,” although he has no realistic prospect of paying this amount.
He apologized at the sentencing, saying that he was deeply ashamed and accepts full responsibility for his wrongdoing. Swain, who called his claim not to be aware of the huge fraud at Bernard L. Madoff Investment Securities LLC “frankly, not believable,” told him he could best demonstrate his remorse by cooperating fully in the prosecution of remaining defendants in the case. Madoff will be able to attend a bat mitzvah for his granddaughter in January before reporting to prison in early February.
He is the second defendant to be sentenced. Of 12 other individuals who have been charged with crimes related to the fraud, seven have pleaded guilty but have not yet been sentenced and five await trial in October, the DealBook article notes.
A number of investors who thought they had large balances at Bernard Madoff’s firm wound up stripped not only of paper profits (accounts purportedly contained nearly $65 billion at the time the fraud became public) but most or all of their principal, and there were reports of elderly investors leaving retirement to work at humble jobs to try to cover their living expenses. Approximately $11 billion has since been recovered by a receiver, and victims are expected to get between $5 and $10 billion back, including money from forfeitures obtained by the U.S. Department of Justice.
Anthony Sabino, who teaches law at the St. John’s University business school in New York, predicted that many of the victims stripped by the fraud won’t be happy with Peter Madoff’s sentence, reports Bloomberg. “Ten years–it just seems to be on the low end of the scale,” he said.
ABAJournal.com: “Madoff Made No Trades for Perhaps 13 Years, Trustee Says”
ABAJournal.com: “Madoff Thought Jig Was Up in 2006, But SEC Didn’t Check Trades”
ABAJournal.com: “Compliance Chief Peter Madoff Admits Unknowing Role in Brother Bernard Madoff’s Massive Ponzi Scheme”
ABAJournal.com: “New Indictment Expands Case Against Madoff Ex-Employees, Says Securities Fraud Started in 1970s”